Besides meeting all of the requisite legal, regulatory, knowledge and technical requirements, the auditor must, first and foremost, be independent of the client in fact and appearance. Independence means that an auditor cannot make or participate in management decisions that may have an effect on the operations of the client.
It has been said by several experts that the public accounting profession probably has more standards than any other profession. A CPA in the practice of public accounting must be familiar with voluminous standards, knowledge of accounting principles, reporting requirements as well as related issues such as income taxes, financial planning, and nearly all aspects of business, including the operation of condominiums.
In order to practice public accounting in Hawaii, every CPA firm must undergo a peer review every 3 years. This new law requires that all CPA firms performing audits as of 12/31/14 must have a peer review performed by 12/31/17. Prior to this new law, CPA firms that did not belong to the AICPA were not required to undergo a peer review. As a result, many association audits performed by firms not subject to a peer review were deficient.
The selection of an outside auditor should, at the very least, require that the auditor have undergone a peer review. All submissions by an auditor under a request for proposal should include a copy of their peer review report. The peer review report is public record.